BILL NUMBER: SB 870	CHAPTERED  10/10/99

	CHAPTER   947
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 10, 1999
	PASSED THE SENATE   SEPTEMBER 7, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 2, 1999
	AMENDED IN ASSEMBLY   AUGUST 30, 1999
	AMENDED IN ASSEMBLY   AUGUST 24, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 8, 1999
	AMENDED IN SENATE   MAY 19, 1999
	AMENDED IN SENATE   MAY 6, 1999
	AMENDED IN SENATE   APRIL 26, 1999

INTRODUCED BY   Senator Vasconcellos

                        FEBRUARY 25, 1999

   An act to amend Sections 10232.1, 10232.2, 10232.3, 10232.4,
10233.2, 10233.5, 10235.2, 10235.8, 10235.30, 10235.40, 10235.50,
10235.52, 10237.1, 10237.4, and 10237.5 of, to add Sections 10232.97
and 10235.94 to, and to repeal and add Section 10232.92 of, the
Insurance Code, relating to long-term care insurance.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 870, Vasconcellos.  Long-term care insurance.
   Existing law prescribes various requirements and conditions
governing the delivery or issuance for delivery in this state of
individual or group long-term care insurance.
   This bill would make various changes to those provisions,
including changes clarifying an insurer's obligations to file, offer,
and market policies intended to be federally qualified and policies
that are not intended to be federally qualified; changes mandating
coverage for care in a residential care facility; changes relating to
coverage for preexisting conditions; changes regarding prohibited
policy provisions and prohibited insurer actions in connection with
policies; and changes regarding the right of a policy or certificate
holder to appeal decisions regarding benefit eligibility, care plans,
services and providers, and reimbursements.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 10232.1 of the Insurance Code is amended to
read:
   10232.1.  (a) Every policy that is intended to be a qualified
long-term care insurance contract as provided by Public Law 104-191
shall be identified as such by prominently displaying and printing on
page one of the policy form and the outline of coverage and in the
application the following words:  "This contract for long-term care
insurance is intended to be a federally qualified long-term care
insurance contract and may qualify you for federal and state tax
benefits."  Every policy that is not intended to be a qualified
long-term care insurance contract as provided by Public Law 104-191
shall be identified as such by prominently displaying and printing on
page one of the policy form and the outline of coverage and in the
application the following words:  "This contract for long-term care
insurance is not intended to be a federally qualified long-term care
insurance contract."
   (b) Any policy or certificate in which benefits are limited to the
provision of institutional care shall be called a "nursing facility
and residential care facility only" policy or certificate and the
words "Nursing Facility and Residential Care Facility Only" shall be
prominently displayed on page one of the form and the outline of
coverage.  The commissioner may approve alternative wording if it is
more descriptive of the benefits.
   (c) Any policy or certificate in which benefits are limited to the
provision of home care services, including community-based services,
shall be called a "home care only" policy or certificate and the
words "Home Care Only" shall be prominently displayed on page one of
the form and the outline of coverage.  The commissioner may approve
alternative wording if it is more descriptive of the benefits.
   (d) Only those policies or certificates providing benefits for
both institutional care and home care may be called "comprehensive
long-term care" insurance.
  SEC. 2.  Section 10232.2 of the Insurance Code is amended to read:

   10232.2.  (a) Every insurer that offers policies or certificates
that are intended to be federally qualified long-term care insurance
contracts, including riders to life insurance policies providing
long-term care coverage, shall fairly and affirmatively concurrently
file, offer, and market long-term care insurance policies or
certificates not intended to be federally qualified, as described in
subdivision (a) of Section 10232.1.
   (b) All long-term care insurance contracts, including riders to
life insurance contracts providing long-term care coverage, approved
after the effective date of this section shall meet all of the
requirements of this chapter.
   (c) Until July 1, 2001, or 90 days after approval of contracts
submitted for approval pursuant to subdivision (b), whichever comes
first, insurers may continue to offer and market previously approved
long-term care insurance contracts.
   (d) Group policies issued prior to January 1, 1997, shall be
allowed to remain in force and not be required to meet the
requirements of this chapter, as amended during the 1997 portion of
the 1997-98 Regular Session, unless those policies cease to be
treated as federally qualified long-term care insurance contracts.
If a policy or certificate issued on a group policy of that type
ceases to be a federally qualified long-term care insurance contract
under the grandfather rules issued by the United States Department of
the Treasury pursuant to Section 7702B(f)(2) of the Internal Revenue
Code, the insurer shall offer the policy and certificate holders the
option to convert, on a guaranteed-issue basis, to a policy or
certificate that is federally tax qualified if the insurer sells
tax-qualified policies.
  SEC. 3.  Section 10232.3 of the Insurance Code is amended to read:

   10232.3.  (a) All applications for long-term care insurance except
that which is guaranteed issue, shall contain clear, unambiguous,
short, simple questions designed to ascertain the health condition of
the applicant. Each question shall contain only one health status
inquiry and shall require only a "yes" or "no" answer, except that
the application may include a request for the name of any prescribed
medication and the name of a prescribing physician.  If the
application requests the name of any prescribed medications or
prescribing physicians, then any mistake or omission shall not be
used as a basis for the denial of a claim or the recision of a policy
or certificate.
   (b) The following warning shall be printed conspicuously and in
close conjunction with the applicant's signature block:
   "Caution:  If your answers on this application are misstated or
untrue, the insurer may have the right to deny benefits or rescind
your coverage."
   (c) Every application for long-term care insurance shall include a
checklist that enumerates each of the specific documents which this
chapter requires be given to the applicant at the time of
solicitation.  The documents and notices to be listed in the
checklist include, but are not limited to, the following:
   (1) The "Important Notice Regarding Policies Available" pursuant
to Section 10232.25.
   (2) The outline of coverage pursuant to Section 10233.5.
   (3) The HICAP notice pursuant to paragraph (8) of subdivision (a)
of Section 10234.93.
   (4) The long-term care insurance shoppers guide pursuant to
paragraph (9) of subdivision (a) of Section 10234.93.
   (5) The "Long-Term Care Insurance Personal Worksheet" pursuant to
subdivision (c) of Section 10234.95.
   (6) The "Notice to Applicant Regarding Replacement of Accident and
Sickness or Long-Term Care Insurance" pursuant to Section 10235.16
if replacement is not made by direct response solicitation or Section
10235.18 if replacement is made by direct response solicitation.
Unless the solicitation was made by a direct response method, the
agent and applicant shall both sign at the bottom of the checklist to
indicate the required documents were delivered and received.
   (d) If an insurer does not complete medical underwriting and
resolve all reasonable questions arising from information submitted
on or with an application before issuing the policy or certificate,
then the insurer may only rescind the policy or certificate or deny
an otherwise valid claim, upon clear and convincing evidence of fraud
or material misrepresentation of the risk by the applicant.  The
evidence shall:
   (1) Pertain to the condition for which benefits are sought.
   (2) Involve a chronic condition or involve dates of treatment
before the date of application.
   (3) Be material to the acceptance for coverage.
   (e) No long-term care policy or certificate may be field issued.
   (f) The contestability period as defined in Section 10350.2 for
long-term care insurance shall be two years.
   (g) A copy of the completed application shall be delivered to the
insured at the time of delivery of the policy or certificate.
   (h) Every insurer shall maintain a record, in accordance with
Section 10508, of all policy or certificate rescissions, both state
and countrywide, except those voluntarily initiated by the insured,
and shall annually furnish this information to the commissioner in a
format prescribed by the commissioner.
  SEC. 4.  Section 10232.4 of the Insurance Code is amended to read:

   10232.4.  (a) No long-term care insurance policy or certificate
other than a group policy or certificate, as described in subdivision
(a) of Section 10231.6, shall use a definition of preexisting
condition which is more restrictive than a condition for which
medical advice or treatment was recommended by, or received from a
provider of health care services, within six months preceding the
effective date of coverage of an insured person.
   (b) Every long-term care insurance policy or certificate shall
cover preexisting conditions that are disclosed on the application no
later than six months following the effective date of the coverage
of an insured, regardless of the date the loss or confinement begins.

   (c) The definition of preexisting condition does not prohibit an
insurer from using an application form designed to elicit the
complete health history of an applicant, and on the basis of the
answers on that application, from underwriting in accordance with
that insurer's established underwriting standards.  Unless otherwise
provided in the policy or certificate a preexisting condition,
regardless of whether it is disclosed on the application, need not be
covered until the waiting period described in subdivision (b)
expires.  Unless a waiver or rider has been specifically approved by
the commissioner, no long-term care insurance policy or certificate
may exclude or use waivers or riders of any kind to exclude, limit,
or reduce coverage or benefits for specifically named or described
preexisting diseases or physical conditions beyond the waiting period
described in subdivision (b).
  SEC. 5.  Section 10232.92 of the Insurance Code is repealed.
  SEC. 6.  Section 10232.92 is added to the Insurance Code, to read:

   10232.92.  Every long-term care policy or certificate covering
confinement in a nursing facility shall also include a provision with
the following features:
   (a) Care in a residential care facility must be covered.
"Residential care facility" means a facility licensed as a
residential care facility for the elderly or a residential care
facility as defined in the Health and Safety Code.  Outside
California, eligible providers are facilities that meet applicable
licensure standards, if any, and are engaged primarily in providing
ongoing care and related services sufficient to support needs
resulting from impairment in activities of daily living or impairment
in cognitive ability and which also provide care and services on a
24-hour basis, have a trained and ready-to-respond employee on duty
in the facility at all times to provide care and services, provide
three meals a day and accommodate special dietary needs, have
agreements to ensure that residents receive the medical care services
of a physician or nurse in case of emergency, and, have appropriate
methods and procedures to provide necessary assistance to residents
in the management of prescribed medications.
   (b) The benefit amount payable for care in a residential care
facility shall be no less than 70 percent of the benefit amount
payable for institutional confinement.
   (c) All expenses incurred by the insured while confined in a
residential care facility, for long-term care services that are
necessary diagnostic, preventative, therapeutic, curing, treating,
mitigating, and rehabilitative services, and maintenance or personal
care services, needed to assist the insured with the disabling
conditions that cause the insured to be a chronically ill individual
as authorized by Public Law 104-191 and regulations adopted pursuant
thereto, shall be covered and payable, up to but not to exceed the
maximum daily residential care facility benefit of the policy or
certificate.  There shall be no restriction on who may provide the
service or the requirement that services be provided by the
residential care facility, as long as the expenses are incurred while
the insured is confined in a residential care facility, the
reimbursement does not exceed the maximum daily residential care
facility benefit of the policy or certificate, and the services do
not conflict with federal law or regulation for purposes of
qualifying for favorable tax consideration provided by Public Law
104-191.
   (d) In policies or certificates that are not intended to be
federally qualified, the threshold establishing eligibility for care
in a residential care facility shall be no more restrictive than that
for home care benefits, as defined in subdivision (a) of Section
10232.8, and the definitions of impairment in activities of daily
living and impairment of cognitive ability shall be the same as for
home care benefits, as defined in subdivisions (a) and (g) of Section
10232.8.  In policies or certificates that are intended to be
federally qualified, the threshold establishing eligibility for care
in a residential care facility shall be no more restrictive than that
for home care benefits, as defined in subdivision (b) of Section
10232.8, and the definitions of impairment in activities of daily
living and impairment in cognitive ability shall be the same as those
for home care benefits as defined in subdivisions (b), (c), (d),
(e), and (f) of Section 10232.8.
  SEC. 7.  Section 10232.97 is added to the Insurance Code, to read:

   10232.97.  In every long-term care policy or certificate that
covers care in a nursing facility, the threshold establishing
eligibility for nursing facility care shall be no more restrictive
than a provision that the insured will qualify if either one of two
criteria are met:
   (a) Impairment in two activities of daily living.
   (b) Impairment in cognitive ability.
  SEC. 8.  Section 10233.2 of the Insurance Code is amended to read:

   10233.2.  Long-term care insurance may not:
   (a) Be canceled, nonrenewed, or otherwise terminated on the
grounds of the age or the deterioration of the mental or physical
health of the insured individual or certificate holder.
   (b) Contain a provision establishing a new waiting period in the
event existing coverage is converted to, or replaced by, a new or
other form within the same insurer, except with respect to an
increase in benefits voluntarily selected by the insured individual
or group policyholder.
   (c) Provide coverage for skilled nursing care only or provide
significantly more coverage for skilled care in a facility than
coverage for lower levels of care.
   (d) Provide for payment of benefits based on a standard described
as "usual and customary," "reasonable and customary," or words of
similar import.
   (e) Terminate a policy, certificate, or rider, or contain a
provision that allows the premium for an in-force policy,
certificate, or rider, to be increased due to the divorce of a
policyholder or certificate holder.
   (f) Include an additional benefit for a service with a known
market value other than the statutorily required home- and
community-based service benefits in Section 10232.9, the assisted
living benefit in Section 10232.92, or a nursing facility benefit,
unless the additional benefit provides for the payment of at least
five times the daily benefit and the dollar value of the additional
benefit is disclosed in the schedule page of the policy.
  SEC. 9.  Section 10233.5 of the Insurance Code is amended to read:

   10233.5.  (a) An outline of coverage shall be delivered to a
prospective applicant for long-term care insurance at the time of
initial solicitation through means which prominently direct the
attention of the recipient to the document and its purpose.
   (b) In the case of agent solicitations, an agent shall deliver the
outline of coverage prior to the presentation of an application or
enrollment form.
   (c) In the case of direct response solicitations, the outline of
coverage shall be presented in conjunction with any application or
enrollment form.
   (d) The outline of coverage shall be a freestanding document,
using no smaller than 10-point type.
   (e) The outline of coverage shall contain no material of an
advertising nature.
   (f) Use of the text and sequence of the text of the outline of
coverage set forth in this section is mandatory, unless otherwise
specifically indicated.
   (g) Text which is capitalized or underscored in the outline of
coverage may be emphasized by other means which provide prominence
equivalent to capitalization or underscoring.
   (h) The outline of coverage shall be in the following form:
      "(COMPANY NAME)
(ADDRESS--CITY AND STATE)
(TELEPHONE NUMBER)
LONG-TERM CARE INSURANCE
OUTLINE OF COVERAGE
(Policy Number or Group Master Policy and Certificate Number)

   1.  This policy is (an individual policy of insurance) ((a group
policy) which was issued in the (indicate jurisdiction in which group
policy was issued)).
   2.  PURPOSE OF OUTLINE OF COVERAGE.  This outline of coverage
provides a very brief description of the important features of the
policy.  You should compare this outline of coverage to outlines of
coverage for other policies available to you.  This is not an
insurance contract, but only a summary of coverage.  Only the
individual or group policy contains governing contractual provisions.
  This means that the policy or group policy sets forth in detail the
rights and obligations of both you and the insurance company.
Therefore, if you purchase this coverage, or any other coverage, it
is important that you READ YOUR POLICY (OR CERTIFICATE) CAREFULLY!
   3.  TERMS UNDER WHICH THE POLICY OR CERTIFICATE MAY BE RETURNED
AND PREMIUM REFUNDED.
   (a) Provide a brief description of the right to return--"free look"
provision of the policy.
   (b) Include a statement that the policy either does or does not
contain provisions providing for a refund or partial refund of
premium upon the death of an insured or surrender of the policy or
certificate.  If the policy contains those provisions, include a
description of them.
   4.  THIS IS NOT MEDICARE SUPPLEMENT COVERAGE.  If you are eligible
for Medicare, review the Medicare Supplement Buyer's Guide available
from the insurance company.
   (a) (For agents) Neither (insert company name) nor its agents
represent Medicare, the federal government or any state government.
   (b) (For direct response) (insert company name) is not
representing Medicare, the federal government or any state
government.
   5.  LONG-TERM CARE COVERAGE.  Policies of this category are
designed to provide coverage for one or more necessary or medically
necessary diagnostic, preventive, therapeutic, rehabilitative,
maintenance, or personal care services, provided in a setting other
than an acute care unit of a hospital, such as in a nursing home, in
the community, or in the home.
   This policy provides coverage in the form of a fixed dollar
indemnity benefit for covered long-term care expenses, subject to
policy (limitations) (waiting periods) and (coinsurance)
requirements.  (Modify this paragraph if the policy is not an
indemnity policy.)
   6.  BENEFITS PROVIDED BY THIS POLICY.
   (a) (Covered services, related deductible(s), waiting periods,
elimination periods, and benefit maximums.)
   (b) (Institutional benefits, by skill level.)
   (c) (Noninstitutional benefits, by skill level.)
   (Any benefit screens must be explained in this section.  If these
screens differ for different benefits, explanation of the screen
should accompany each benefit description.  If an attending physician
or other specified person must certify a certain level of functional
dependency in order to be eligible for benefits, this too must be
specified.  If activities of daily living (ADLs) are used to measure
an insured's need for long-term care, then these qualifying criteria
or screens must be explained.)
   7.  LIMITATIONS AND EXCLUSIONS.
   (Describe:
   (a) Preexisting conditions.
   (b) Noneligible facilities/provider.
   (c) Noneligible levels of care (e.g., unlicensed providers, care
or treatments provided by a family member, etc.).
   (d) Exclusions/exceptions.
   (e) Limitations.)
   (This section should provide a brief specific description of any
policy provisions which limit, exclude, restrict, reduce, delay, or
in any other manner operate to qualify payment of the benefits
described in (6) above.)
   THIS POLICY MAY NOT COVER ALL THE EXPENSES ASSOCIATED WITH YOUR
LONG-TERM CARE NEEDS.
   8.  RELATIONSHIP OF COST OF CARE AND BENEFITS.  Because the costs
of long-term care services will likely increase over time, you should
consider whether and how the benefits of this plan may be adjusted.
(As applicable, indicate the following:
   (a) That the benefit level will NOT increase over time.
   (b) Any automatic benefit adjustment provisions.
   (c) Whether the insured will be guaranteed the option to buy
additional benefits and the basis upon which benefits will be
increased over time if not by a specified amount or percentage.
   (d) If there is a guarantee, include whether additional
underwriting or health screening will be required, the frequency and
amounts of the upgrade options, and any significant restrictions or
limitations.
   (e) And finally, describe whether there will be any additional
premium charge imposed, and how that is to be calculated.)
   9.  TERMS UNDER WHICH THE POLICY (OR CERTIFICATE) MAY BE CONTINUED
IN FORCE OR DISCONTINUED.
   (a) Describe the policy renewability provisions.
   (b) For group coverage, specifically describe
continuation/conversion provisions applicable to the certificate and
group policy.
   (c) Describe waiver of premium provisions or state that there are
no waiver of premium provisions.
   (d) State whether or not the company has a right to change
premium, and if that right exists, describe clearly and concisely
each circumstance under which the premium may change.
   10.  ALZHEIMER'S DISEASE, ORGANIC DISORDERS, AND RELATED MENTAL
DISEASES.
   (State that the policy provides coverage for insureds clinically
diagnosed as having Alzheimer's Disease, organic disorders, or
related degenerative and dementing illnesses.  Specifically describe
each benefit screen or other policy provision that provides
preconditions to the availability of policy benefits for that
insured.)
   11.  PREMIUM.
   (a) State the total annual premium for the policy.
   (b) If the premium varies with an applicant's choice among benefit
options, indicate the portion of annual premium which corresponds to
each benefit option.
   12.  ADDITIONAL FEATURES.
   (a) Indicate if medical underwriting is used.
   (b) Describe other important features.
   13.  INFORMATION AND COUNSELING.  The California Department of
Insurance has prepared a Consumer Guide to Long-Term Care Insurance.
This guide can be obtained by calling the Department of Insurance
toll-free telephone number.  This number is 1-800-927-HELP.
Additionally, the Health Insurance Counseling and Advocacy Program
(HICAP) administered by the California Department of Aging, provides
long-term care insurance counseling to California senior citizens.
Call the HICAP toll-free telephone number 1-800-434-0222 for a
referral to your local HICAP office."
  SEC. 9.5.  Section 10235.2 of the Insurance Code is amended to
read:
   10235.2.  No long-term care insurance policy delivered or issued
for delivery in this state shall use the terms set forth below,
unless the terms are defined in the policy and the definitions
satisfy the following requirements:
   (a) "Medicare" shall be defined as the "Health Insurance for the
Aged Act," Title XVIII of the Social Security Amendments of 1965 as
then constituted or later amended, or Title I, Part I of Public Law
89-97, as enacted by the 89th Congress of the United States of
America and popularly known as the Health Insurance for the Aged Act,
as then constituted and any later amendments or substitutes thereof,
or words of similar import.
   (b) "Skilled nursing care," "intermediate care," "home health
care," and other services shall be defined in relation to the level
of skill required, the nature of the care and the setting in which
care is required to be delivered.
   (c) All providers of services, including, but not limited to,
skilled nursing facilities, intermediate care facilities, and home
health agencies shall be defined in relation to the services and
facilities required to be available and the licensure or degree
status of those providing or supervising the services.  The
definition may require that the provider be appropriately licensed or
certified.
  SEC. 10.  Section 10235.8 of the Insurance Code is amended to read:

   10235.8.  No policy may be delivered or issued for delivery in
this state as long-term care insurance if the policy limits or
excludes coverage by type of illness, treatment, medical condition,
or accident, except as to the following:
   (a) Preexisting conditions or diseases.
   (b) Alcoholism and drug addiction.
   (c) Illness, treatment, or a medical condition arising out of any
of the following:
   (1) War or act of war, whether declared or undeclared.
   (2) Participation in a felony, riot, or insurrection.
   (3) Service in the armed forces or units auxiliary thereto.
   (4) Suicide, whether sane or insane, attempted suicide, or
intentionally self-inflicted injury.
   (5) Aviation in the capacity of a non-fare-paying passenger.
   (d) Treatment provided in a government facility, unless otherwise
required by law, services for which benefits are available under
Medicare or other governmental programs (except Medi-Cal or
medicaid), any state or federal workers' compensation, employer's
liability or occupational disease law, or any motor vehicle no fault
law, services provided by a member of the covered person's immediate
family, and services for which no charge is normally made in the
absence of insurance.
   This section does not prohibit exclusions and limitations by type
of provider or territorial limitations.
  SEC. 11.  Section 10235.30 of the Insurance Code is amended to
read:
   10235.30.  (a) No insurer may deliver or issue for delivery a
long-term care policy in this state unless the insurer offers at the
time of application an option to purchase a shortened benefit period
nonforfeiture benefit with the following features:
   (1) Eligibility begins no later than after 10 years of premium
payments.
   (2) The lifetime maximum benefit is no less than the dollar
equivalent of three months of care at the nursing facility per diem
benefit contained in the policy or the amount of the premiums paid,
whichever is greater.
   (3) The same benefits covered in the policy and any riders at the
time eligibility begins are payable for a qualifying claim.
   (4) The lifetime maximum benefit may be reduced by the amount of
any claims already paid.
   (5) Cash back, extended term, and reduced paid-up forms of
nonforfeiture benefits shall not be allowed.
   (6) The lifetime maximum benefit amount increases proportionally
with the number of years of premium payment.
   (b) This section shall not apply to life insurance policies that
accelerate benefits for long-term care.
  SEC. 12.  Section 10235.40 of the Insurance Code is amended to
read:
   10235.40.  (a) No individual long-term care policy or certificate
shall be issued until the applicant has been given the right to
designate at least one individual, in addition to the applicant, to
receive notice of lapse or termination of a policy or
                              certificate for nonpayment of premium.
The insurer shall receive from each applicant one of the following:

   (1) A written designation listing the name, address, and telephone
number of at least one individual, in addition to the applicant, who
is to receive notice of lapse or termination of the policy or
certificate for nonpayment of premium.
   (2) A waiver signed and dated by the applicant electing not to
designate additional persons to receive notice.  The required waiver
shall read as follows:
"Protection Against Unintended Lapse.
I understand that I have the right to designate at least one person
other than myself to receive notice of lapse or termination of this
long-term care insurance policy for nonpayment of premium.  I
understand that notice will not be given until 30 days after a
premium is due and unpaid.  I elect not to designate any person to
receive the notice.


  ________________________________________    ______________
          Signature of Applicant                  Date"

   (b) The insurer shall notify the insured of the right to change
the written designation, no less often than once every two years.
   (c) When the policyholder or certificate holder pays the premium
for a long-term care insurance policy or certificate through a
payroll or pension deduction plan, the requirements contained in
subdivision (a) need not be met until 60 days after the policyholder
or certificate holder is no longer on that deduction payment plan.
The application or enrollment form for a certified long-term care
insurance policy or certificate shall clearly indicate the deduction
payment plan selected by the applicant.
   (d) No individual long-term care policy or certificate shall lapse
or be terminated for nonpayment of premium unless the insurer, at
least 30 days prior to the effective date of the lapse or
termination, gives notice to the insured and to the individual or
individuals designated pursuant to subdivision (a), at the address
provided by the insured for purposes of receiving notice of lapse or
termination.  Notice shall be given by first-class United States
mail, postage prepaid, not less than 30 days after a premium is due
and unpaid.
   (e) Each long-term care insurance policy or certificate shall
include a provision which, in the event of lapse, provides for
reinstatement of coverage, if the insurer is provided with proof of
the insured's cognitive impairment or the loss of functional
capacity.  This option shall be available to the insured if requested
within five months after termination and shall allow for the
collection of a past due premium, where appropriate.  The standard of
proof of cognitive impairment or loss of functional capacity shall
not be more stringent than the benefit eligibility criteria on
cognitive impairment or the loss of functional capacity contained in
the policy certificate.
  SEC. 13.  Section 10235.50 of the Insurance Code is amended to
read:
   10235.50.  Every policy or certificate shall include a provision
that gives the policyholder or certificate holder the following
rights to reduce coverage and lower premiums:
   (a) A right, exercisable any time after the first year, to retain
a policy or certificate while lowering the premium in no fewer than
the following three ways:
   (1) Reducing the lifetime maximum benefit.
   (2) Reducing the nursing facility per diem and reducing the home-
and community-based service benefits of a home care only policy and
of a comprehensive long-term care policy.
   (3) Converting a "comprehensive long-term care" policy or
certificate to a "Nursing Facility Only" or a "Home Care Only" policy
or certificate, if the insurer issues those policies or certificates
for sale in the state.
   (b) The premium for the policy or certificate that is reduced in
coverage will be based on the age of the insured at issue age and the
premium rate applicable to the amount of reduced coverage at the
original issue date.
   (c) If the contract in force at the time a reduction in coverage
is made provides for benefit adjustments for anticipated increases in
the costs of long-term care services, then the reduced nursing
facility per diem, lifetime maximum benefit, and daily, weekly, or
monthly home care benefits shall be adjusted in the same manner and
in the same amount as the contract in force prior to the reduction in
coverage.
   (d) In the event a policy or certificate is about to lapse, the
insurer shall provide written notice to the insured of the options in
subdivision (a) to lower the premium by reducing coverage and of the
premiums applicable to the reduced coverage options.  The insurer
may include in the notice additional options to those required in
subdivision (a).  The notice shall provide the insured at least 30
days in which to elect to reduce coverage and the policy shall be
reinstated without underwriting if the insured elects the reduced
coverage.
   (e) In the event of a premium increase, the insured shall be
offered the option to lower premiums and reduce coverage.
  SEC. 14.  Section 10235.52 of the Insurance Code is amended to
read:
   10235.52.  (a) Every policy shall contain a provision that, in the
event the insurer develops new benefits or benefit eligibility or
new policies with new benefits or benefit eligibility not included in
the previously issued policy, the insurer will grant current holders
of its policies who are not in benefit or within the elimination
period the following rights:
   (1) The policyholder will be notified of the availability of the
new benefits or benefit eligibility or new policy within 12 months.
The insurer's notice shall be filed with the department at the same
time as the new policy or rider.
   (2) The insurer shall offer the policyholder new benefits or
benefit eligibility in one of the following ways:
   (A) By adding a rider to the existing policy and paying a separate
premium for the new benefit or benefit eligibility based on the
insured's attained age.  The premium for the existing policy will
remain unchanged based on the insured's age at issuance.
   (B) By replacing the existing policy or certificate in accordance
with Section 10234.87.
   (C) By replacing the existing policy or certificate with a new
policy or certificate in which case consideration for past insured
status shall be recognized by setting the premium for the replacement
policy or certificate at the issue age of the policy or certificate
being replaced.
   (b) The insured may be required to undergo new underwriting, but
the underwriting can be no more restrictive than if the policyholder
or certificate holder were applying for a new policy or certificate.

   (c) The insurer of a group policy as defined under subdivisions
(a) to (c), inclusive, of Section 10231.6 must offer the group
policyholder the opportunity to have the new benefits and provisions
extended to existing certificate holders, but the insurer is relieved
of the obligations imposed by this section if the holder of the
group policy declines the issuer's offer.
  SEC. 15.  Section 10235.94 is added to the Insurance Code, to read:

   10235.94.  Every policy or certificate shall include a provision
giving the policyholder or certificate holder the right to appeal
decisions regarding benefit eligibility, care plans, services and
providers, and reimbursement payments.
  SEC. 16.  Section 10237.1 of the Insurance Code is amended to read:

   10237.1.  No insurer may deliver or issue for delivery a long-term
care insurance policy or certificate in this state unless the
insurer offers to each policyholder and certificate holder, in
addition to any other inflation protection, the option to purchase a
long-term care insurance policy or certificate that provides for
benefit levels and benefit maximums to increase to account for
reasonably anticipated increases in the costs of long-term care
services covered by the policy.  Insurers shall offer to each
policyholder and certificate holder, at the time of purchase, the
option to purchase a long-term care insurance policy or certificate
containing an inflation protection feature which is no less favorable
than one that does one or more of the following:
   (a) Increases benefit levels annually in a manner so that the
increases are compounded annually at a rate of not less than 5
percent.
   (b) Guarantees the insured individual the right to periodically
increase benefit levels without providing evidence of insurability or
health status and without regard to claim status or history so long
as the option for the previous period has not been declined.  The
amount of the additional benefit shall be no less than the difference
between the existing policy benefit and that benefit compounded
annually at a rate of at least 5 percent for the period beginning
with the purchase of the existing benefit and extending until the
year in which the offer is made.
   (c) Covers a specified percentage of actual or reasonable charges
and does not include a maximum specified indemnity amount limit.
   (d) The insurer of a group long-term care insurance policy as
defined in subdivision (a), (b), or (c) of Section 10231.6, shall
offer the holder of the group policy the opportunity to have the
inflation protection pursuant to this section extended to existing
certificate holders, but the insurer is relieved of the obligations
imposed by this section if the holder of the group policy declines
the insurer's offer.
  SEC. 17.  Section 10237.4 of the Insurance Code is amended to read:

   10237.4.  (a) Inflation protection benefit increases under a
policy that contains these benefits shall continue without regard to
an insured's age, claim status or claim history, or the length of
time the person has been insured under the policy.
   (b) An offer of inflation protection that provides for automatic
benefit increases shall include an offer of a premium which the
insurer expects to remain constant.  The offer shall disclose in a
conspicuous manner that the premium may change in the future unless
the premium is guaranteed to remain constant.
   (c) The inflation protection benefit increases under a policy or
certificate that contains an inflation protection feature shall not
be reduced due to the payment of claims.
  SEC. 18.  Section 10237.5 of the Insurance Code is amended to read:

   10237.5.  (a) An inflation protection provision that increases
benefit levels annually in a manner so that the increases are
compounded annually at a rate not less than 5 percent shall be
included in a long-term care insurance policy unless an insurer
obtains a rejection of inflation protection signed by the
policyholder.
   (b) The rejection, to be included in the application or on a
separate form, shall state:
"I have reviewed the outline of coverage and the graphs that compare
the benefits and premiums of this policy with and without inflation
protection.  Specifically, I have reviewed the plan, and I reject 5
percent annual compound inflation protection.


  ________________________________________    ______________
          Signature of Applicant                  Date"
